Bank of England (BoE) Governor Andrew Bailey stated on Thursday at the Monetary Policy Committee's (MPC) press conference that the institution must take necessary steps and "get to the point" where it can stop the rise in inflation, which is why it has decided to raise bank rates and will likely have to do the same with interest rates.
Bailey admitted the United Kingdom's households are facing a "difficult situation," but claimed the effect on the ongoing upward trend in inflation on domestic prices would be worse without increasing bank and interest rates. Member of the MPC Ben Broadbent added that, in a long-term aspect, "the best thing for households" the BoE can do is maintain its policies to keep inflation within reasonable limits.
Bailey also noted that unemployment has been lower than expected amid the COVID-19 pandemic and that the labor market and growth in earnings remain strong. Still, he admitted there is "unfortunately, a squeeze from energy prices," which drives inflation higher. He also warned there is a chance those costs would not come down in case the tensions on the border between Russia and Ukraine escalate into an armed conflict.
